Editor’s note: This article was first published in June 2011, and its data are from that month: coal’s 70% rise since early 2010, the Bloomberg World Coal index gains and the company returns. The titled 2011-2012 horizon has long passed.
I didn’t know this, since I usually focus on IBEX stocks (Spain’s benchmark index). Investors who put money into coal at the start of 2010 have found that this commodity has risen 70% to date, and the outlook seems to point to a continuing uptrend, judging by the Bloomberg World Coal index and strong demand from emerging countries.
Coal reserves are potentially larger than those of natural gas and oil, which has made coal a very profitable investment. The API 2 and API 4 contracts are the most traded on the futures market and the ones that have gained the most in value.
Emerging markets account for more than 50% of world commodity consumption, and this share could grow over the next eight years.
The Bloomberg World Coal index tracks 38 natural resources companies around the world that specialise in coal. The index has risen 130% over the last 12 months and 12% so far this year.
The companies whose shares have risen most are Chinese, Indian and Indonesian, at 29%, 23% and 26% respectively, not forgetting a South African company that has gained 21%. In developed countries, the companies in this index have not been as fortunate, though they haven’t done badly either: the United States (Cliffs Natural Resources Inc) with 8% and Australia (New Hope Corp) with 3%.
As for the experts, their recommendation on investing in this commodity is clear: they say that this summer, coal is a must in your investment portfolio.
Featured image: Beyond Coal & Gas Image Library, CC BY 2.0, via Flickr.
